Archive for: February 20, 2007

If supposed that a trader open pair positions in multiple currencies, long and short in direct currencies and long and long or short and short in indirect currencies: for example USD/CHF long and EURO/USD long at the same time and same lot size.
The Sum of the P/L of these two positions changes and when the total Sum of these two pairs reach to a specific profit, trader closes both positions at the same time. So in this strategy positions are always in hedge condition and have very low risk than other cases.
Why? Simply because correlation is important and they do not move in tandem accurately 100% of the time. And you can make money in these imperfections
Yes you could miss great opportunities to make a lot of money, but more important is that you will be stopped out less often.
Capital preservation is primordial and more important it all depends of your attitude towards risk.
It is not perfect but it works as long as you plan your trade and trade your plan.
I`ve tried this with EUR/USD and GBP/USD also with EUR/GBP and EUR/CHF daily trend as a base indicators.
This strategy worked 60% for me. Another 20% with ~0 profit, based on the SL/TP ratio (usually stop loses are far lower than take profits, but GBP moves have a higher amplitude. If one trade is wrong then SL is hit and that trade stopped, while the another trade is going its way until take profit is hit or trade is closed in advantage area).
20% of trades are unprofitable and want to say here that these 20% of loser will “eat” ~45% of earnings in total.
Statistics of this study:
Trades: 18 (*2) = 36
Time frame: 3 months.
Winners 11 (*2) trades. 11 wins, 11 loses. But the final result for every pair is a win.
50/50 7 trades.
7 losers, both pairs. All seven times first was hit one “stop loss”, then market turns back and hits another stop lose.
All stop loses were at 35-40 pips, TPs at 70-110 pips.

Advantage - ~2.5%/month of capital without stress.
Disadvantage - very long time frame, and low(?) level of earnings.